Meg Whitman plans to merge printing and PC groups in major Hewlett-Packard reorganization

Hewlett-Packard (HPQ) is planning to merge its massive printing and personal computer divisions, in a corporate overhaul that represents new CEO Meg Whitman's first big move to turn the troubled tech giant around, a source confirmed to this newspaper Tuesday.

The reorganization is likely to include some layoffs, industry experts said, as Whitman follows through on a promise to streamline HP's far-flung tech businesses and cut operating costs. No details have been announced, however, and a company spokesman declined to comment Tuesday.

By combining the two divisions, Whitman is also shaking up the executive ranks at HP: The new unit will be led by longtime PC chief Todd Bradley, 53, who is widely credited with helping make HP the world's No. 1 seller of PCs in recent years. Veteran printing head Vyomesh Joshi, 57, will leave the company.

In addition, analysts say the move may represent HP's acknowledgment that, while PCs and printing are still a big part of its business, the company sees a greater future in selling more profitable products such as commercial computing hardware, software and tech services.

"That's where they really believe their growth is," said Roger Kay, a veteran analyst with Endpoint Technologies.

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Printing and PCs provided a combined $15 billion in revenue for HP last quarter, or about half the company's total sales. But both divisions have reported slowing sales in recent years, as printing habits have changed and consumers have turned to smartphones and tablets as alternatives to PCs.

A formal announcement of the move, which was first reported Tuesday by the tech blog All Things D, is expected soon. Whitman, who was named CEO six months ago, is scheduled to speak at the company's annual shareholder meeting Wednesday.

HP has considered a number of broad changes for its PC and printing groups in recent years, including former CEO Léo Apotheker's controversial proposal last summer to get out of the PC business entirely. That plan was part of a broader strategic effort to emphasize more profitable businesses, including commercial software and cloud computing.

Whitman vetoed the idea of a PC spinoff soon after she replaced Apotheker last fall, after concluding it didn't make financial sense. But she has said HP will continue to expand its software and commercial tech businesses.

Some analysts said the new corporate structure in particular shows the declining prominence of printing at HP. Printing was once the company's biggest business, providing a third of HP's annual revenue and more than half its operating profit during the middle years of last decade. But printing's contribution has gotten smaller as HP has expanded in data center hardware, software and tech services.

While sales of PCs and printers are not drying up overnight, analysts say both businesses are threatened by new technology trends. Many consumers and workers are turning to smartphones and tablets instead of PCs, and they are increasingly using those devices to store and display documents and photos, instead of printing them out.

HP hopes that merging the two divisions will help save money by consolidating sales and other functions. The source familiar with HP's plans, who spoke on condition of anonymity, said the company also hopes to design printers and PCs that work better together and market them more effectively.

Whitman has previously said she wants to cut expenses, both to bolster profits and so she can invest more in HP's research and development efforts. She has blamed some of the company's slowing sales on a failure to keep up with innovations from competing tech companies.

On paper, combining the two divisions would make the company's flagship PC business look better almost immediately, said Charles King, a tech analyst with the Pund-IT firm. While the PC unit produces more revenue, the printing group has traditionally been more profitable, thanks to recurring sales of expensive ink.

HP often sells printers at close to its own cost, while selling ink at a high markup because it knows each printer will create a steady stream of future ink sales.

Joshi and Bradley are both well regarded in the tech industry, and both have been considered possible CEO candidates at HP in the past. But analyst Brian Marshall at ISI Group noted that Bradley is especially well-known and liked on Wall Street.

Whitman may also want to give Bradley more responsibility, according to Kay, after Bradley made it known he was unhappy about being passed over for CEO and about Apotheker's treatment of the PC division.

Some industry experts, however, noted that PCs and printing are very different businesses.

With consumers and office workers printing less, said Angèle Boyd, a printing industry expert for research firm IDC, the biggest growth opportunities lie in selling big digital presses and ink to publishers and other commercial printing companies, which don't necessarily buy PCs.

Since taking over as CEO of HP in September, Whitman had focused on stabilizing a company that had seen two previous CEOs ousted in the previous two years. But while she refrained from drastic changes in her first six months on the job, Whitman hinted she was ready to start making changes after the company's last earnings report.

Printing "has been the lifeblood of our company for a long time," she told analysts last month. But she added, "there are definitely some market shifts occurring and we've got to create the capacity financially to improve profits in this business."

Contact Brandon Bailey at 408-920-5022; follow him at Twitter.com/BrandonBailey.